1968 (9) TMI 50 - HC - Income Tax

Search - whether the document and goods are such as come within the scope of seizure contemplated u/s. 132 - challenge to the vires of section 132

Issues Involved:
1. Legality of the search and seizure under Section 132 of the Income-tax Act, 1961.
2. Whether the Commissioner of Income-tax had "reason to believe" that documents would not be produced.
3. Allegations of excessive and indiscriminate search and seizure.
4. Validity of the inventory and panchnama process.
5. Compliance with procedural requirements and rules.

Detailed Analysis:

1. Legality of the Search and Seizure under Section 132 of the Income-tax Act, 1961:
The judgment primarily concerns the legality of the search and seizure conducted under Section 132 of the Income-tax Act, 1961. The court examined whether the Commissioner of Income-tax had the authority and sufficient grounds to issue the search warrants. The warrants were issued based on the belief that the firm and individuals involved had not disclosed income and were in possession of undisclosed valuable articles. The court upheld the legality of the search and seizure, stating that the Commissioner had sufficient grounds and information to believe that the documents would not be produced if summoned.

2. Whether the Commissioner of Income-tax had "Reason to Believe" that Documents Would Not Be Produced:
The court scrutinized the reasons provided by the Commissioner for issuing the search warrants. It was argued that the firm had always complied with previous notices and summonses. However, the court found that the Commissioner had credible information about large-scale tax evasion involving fictitious transactions and forged documents. The court emphasized that the belief of the Commissioner must be based on reasonable grounds, which, in this case, were adequately demonstrated through detailed affidavits and the nature of the information received.

3. Allegations of Excessive and Indiscriminate Search and Seizure:
The appellants argued that the search and seizure were conducted indiscriminately and without proper scrutiny, leading to the seizure of irrelevant documents. The court examined the panchnama and the inventory lists, noting that many items were not seized, indicating that the officers had applied their minds during the search. The court concluded that the search was not excessive or indiscriminate, as the officers had followed the instructions and seized only relevant documents.

4. Validity of the Inventory and Panchnama Process:
The appellants challenged the validity of the inventory and panchnama, arguing that there were irregularities, such as a single panchnama for two separate warrants. The court held that the panchnama process was substantially compliant with the requirements of the Criminal Procedure Code, and any minor irregularities did not vitiate the search and seizure. The court noted that the panchnama was signed by the representatives of the firm, indicating their acknowledgment of the process.

5. Compliance with Procedural Requirements and Rules:
The court examined whether the search and seizure complied with the procedural requirements under the Income-tax Act and the related rules. It was argued that the search at the residential premises continued beyond reasonable hours and included documents belonging to third parties. The court found that the search was conducted within legal parameters, and the officers had acted upon the consent of the assessee when transporting the documents to the income-tax office for inventory. The court emphasized that the procedural safeguards were adequately followed, and the search was conducted in good faith.

Conclusion:
The court dismissed the appeal, upholding the legality of the search and seizure conducted under Section 132 of the Income-tax Act, 1961. The court found that the Commissioner had sufficient grounds to believe that the documents would not be produced if summoned, and the search was conducted in compliance with legal and procedural requirements. The allegations of excessive and indiscriminate search were not substantiated, and the inventory and panchnama processes were found to be valid. The interim orders were vacated, and the operation of the order was stayed for one week to allow the appellants to obtain certified copies.

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